ACADIA Pharmaceuticals Inc. (ACAD) Earnings Call Transcript & Summary

Everybody, good afternoon. So thanks for joining us again at the Bank of America Healthcare Conference. I am Tazeen Ahmad. I am one of the SMID biotech analysts here at the bank. It's a pleasure for us to have our next presenting company with us, ACADIA Pharmaceuticals. Sitting next to me are Steve and Mark. I'll let you guys introduce yourselves, and then maybe, Steve, you can give us a quick overview of the company, and then we can do a little bit more specific Q&A after that, if that works for you.

Yes, it sounds great. So I'm Steve Davis, I'm the CEO of ACADIA.

And I'm Mark Schneyer, I'm the CFO of ACADIA.

Great. So thanks very much for having us, Tazeen. Thanks to each of you for coming out today. I thought I'd start with just a very few brief comments to level set, and then we'll get right into more interesting Q&A. So to accomplish our mission, we -- our business plan is founded on 3 pillars. First is to advance our franchise in Parkinson's disease psychosis. In the first quarter of this year, we reported $115.5 million in sales. That reflects 8% revenue growth year-over-year and it reflects 4% increase in demand volume year-over-year. It's also in line with our expectations for the year -- for the full year of $510 million to $560 million in sales. We've done this, I guess, the backdrop of the Parkinson's disease market that's been disproportionately impacted in the pandemic. I'm sure we'll talk more about this in Q&A, but -- the -- about 1/4 of our business is in long-term care and in long-term care, the occupancy rates are down in the low double digits and have continued to be down, showing some very recent growth there but have continued to be significantly from where they were part of the pandemic. In office-based settings, about 75% of our business, in-person visits with Parkinson's treating physicians are down about 20% since the beginning of the pandemic. We've been able to continue to grow market share, and new patients and new prescribing physicians against this significant headwind. And the good news is, it's not going to last forever. We're -- I think just the fact that we're all here today is a good reflection of how is the society we're beginning to adapt and live in a new normal. So as these -- as we adapt to a new normal and these headwinds abate, they'll turn into tailwinds to further accelerate our growth. Our second pillar is based upon our late-stage portfolio, where we have 3 development programs. One is in Alzheimer's disease psychosis, or ADP. ADP is about 7x the size of Parkinson's disease psychosis where we're currently approved. And as I'm sure all of you know, we've resubmitted sNDA on ADP. We have an advisory committee meeting scheduled for June 17 and an action date with the FDA scheduled for August 4. So we're very eager to go to make our case to the advisory committee and continue to make our case with the FDA that we should be the first drug approved for the treatment of Alzheimer's disease psychosis. Second, program in our late-stage portfolio is our Rett Syndrome program, where we announced in late last year in late 2021, very positive results from our Phase III LAVENDER study program. And in that program, we anticipate submitting an NDA in the middle of this year. We expect a priority review and that should set us up for an action date or PDUFA date with FDA in the first quarter of next year. Third program in our late-stage development is negative symptoms of schizophrenia. This is also with pimavanserin, which is the generic name for our marketed drug, NUPLAZID. And the negative symptoms of schizophrenia is another area where there's no drug approved to treat these patients. And we're very eager to complete the second of 2 pivotal studies that were -- that we have or are conducting. First pivotal study is completed. It was positive. That's something that's kind of a rarity in the negative symptom space where it's been very difficult to get drugs through the gauntlet. So we're very happy to have one positive pivotal study wrapping up the work around the end of this year and second pivotal study, well, the results in that next year. Just as a relative comparison, the negative symptoms schizophrenia effect is about 700,000 patients. So it's about 5x the size of Parkinson's disease psychosis. So with our currently marketed drug, NUPLAZID, we have 2 opportunities in other adjacent indications where the addressable population is dramatically larger than we're currently serving, where I believe NUPLAZID just in PDP will grow to be a very substantial product. Third pillar for us is to advance the next wave of breakthroughs in this space. And for that, we have a series of early stage programs in our portfolio as well as continuing to do a lot of business development and effort that Mark leads, and we're very eager to continue to advance these in any early stage portfolio. In our industry, there's a fair amount of attrition. So you want to make sure you've made sufficient prudent investments, and we've been doing that and had very good success with that in the last few years. So with that, I'll pause, turn it back over to you for Q&A.

Okay. Great. Thanks for that overview, Steve. So maybe let's start off with this quarter sales of NUPLAZID just to get that out of the way. So you reiterated guide, but I think the quarter came in a little bit lower than maybe what consensus had modeled. So you don't provide quarterly sales guidance, so that's probably part of it. But can you just talk to us about some of the qualitative measures that you use to make sure that you feel confident about, let's say, reiterating guidance? And what is this quarter looking like qualitatively relative to expectations internally?

Yes, sure. So let me just start by saying for the -- as you mentioned for the first quarter, we came in a little bit below consensus. We don't guide quarterly. I think that is the primary reason for the gap there. But because we hit our plan. So were right at what we expected to do for the quarter. And as I mentioned, we -- that quarter reflects 4% demand volume growth year-over-year. We had 4% growth in demand last year for the full year. And these expectations are central to the guidance we've given for the full year of $510 million to $560 million. Having said that, maybe some -- just a little bit of additional color I can add as we think about the remainder of the year. I think where we land in the year will be meaningfully impacted by where we stand as a society with COVID and most importantly, where long-term care facilities stand in terms of their ability to -- they have been to patients and get their census numbers back to where they were pre-pandemic. And where individual treating physicians stand in terms of being able to see their patients in person. If they're not seeing them in person, it kind of has a disproportionate impact on new prescriptions because physicians are very reticent to prescribe a new drug to a patient if they're not seeing in a person. Through telemedicine, they're more comfortable extending or renewing existing drugs but tend to be more reticent on prescribing new drugs. So it's another -- or an indicator that we keep our eye very careful, very closely on. Where we stand today is we are beginning to -- we're seeing -- definitely seeing stabilization in these metrics that I mentioned. And we are beginning to see some signs of early growth. So I would say we're cautiously optimistic that we'll be able to build on this throughout the year. So for example, in long-term care, occupancy rates, pre-pandemic, they never operated at 100% capacity, but occupancy rates were at about 83% pre-pandemic. They dropped down into the low 7 -- around 70% and they begin creeping up the last couple of months a little bit. So that's -- it's good news for us. And it also is reflective of what we're hearing in long-term care facilities. Similar picture in office-based setting where we're hearing more and more physicians talk about -- they're encouraging their patients to come in, in person. And so as I mentioned, that's another early indicator we look to. So I can't predict exactly how the pandemic will evolve, whether there'll be more variants. But what I can say is we are beginning to see this market adjust to a new normal.

Okay. How important is it for your sales force to have in-person touch points? So it's becoming more of a mature launch. The adjustments that you need to fit into a virtual environment, do you think that you'll be continuing to use those on a go-forward basis?

I do. One of the things about the Parkinson's disease psychosis market is the patient population is fairly dynamic. And what I mean by that is patients typically are not diagnosed, the psychosis occurs later in the course of the disease in Parkinson's. So they're typically not diagnosed until later in the disease state and their life expectancy is just not as long as it would be for just a pure Parkinson's patients at first diagnosis, or by way of example, for schizophrenia patients or depression patients or other patients with psychiatric illness. And so as a consequence, unfortunately, due to demographics and the fact that we have a cure for Parkinson's disease, we've got a lot of patients continue to come into the top of that patient population and then because they're relatively short last band wave patients that die. And so because it's a fairly dynamic population because patients many times don't make the connectivity between the hallucinations and delusions that they're having with their Parkinson's disease. There's kind of this perpetual information gap that we're always seeking to close as new patients come into the patient population and develop psychosis. And so at this point, in this product life cycle, I think we were -- we'll find a lot of these tools. We've -- they've continued to be very productive in growing the brand despite the pandemic. As I mentioned, we've continued to grow. It's been a slower growth rates during the pandemic. And as we adjust to a new normal and these conditions, as we adapt and the conditions change, we expect those growth rates to accelerate.

Yes. On average, how often does the Parkinson's patients see his or her physician in a year?

So it varies. Some see them on 3-month cycles, 6-month cycle is probably the most common. It's rare that they go longer than that. Some patients depending on the conditions of that specific patient may see their doctor more frequently.

So when a patient has a virtual appointment with the doctor, is there a family member with them at that virtual visit? I guess I'm just trying to deduce how difficult is it to figure out that a patient has started to have hallucinations or delusions if they haven't had it before and trying to triangulate basically how important it's going to be to go back as much as possible to in person.

Yes. It's a great question. In some instances, doing a telemedicine appointment and having a caregiver there can result in a physician getting information that they might not otherwise have because that caregiver might not come with him through the appointment or it might be a different caregivers. So in some respects, that can be helpful. By and large, though, doctors are still just reticent to write new drugs, whether it's new drugs promoted therapy or new drugs or psychosis in these Parkinson's patients without seeing them in person. And that probably is just a consequence of the fact that all of this is a psychological condition, it's treated almost entirely by neurologists. And so neurologists are very focused on seeing their patients in person and assessing their motor capabilities, et cetera. And so I think there's probably a little bit of a legacy in that respect as well.

Okay. Can you just remind us what the current payer mix is for NUPLAZID sales and if that's changed at all?

Yes, it hasn't really changed much -- pretty much the same as it was when we launched the drug. It was about 75% Medicare, the other 25% is a mix of commercial, TRICARE and VA, other government payers and then just a very small portion of Medicaid.

Okay. And then as far as the IP estate goes, I think we've been starting to get a little bit more questions on that. So can you just remind us of when the composition of the matter expires for NUPLAZID? What additional patent estate you've built around that?

Yes, yes, thanks for the question. So NUPLAZID is a small molecule. And of course, with small molecules, the first thing that we typically look to is composition of matter patents. In our case, we have some important other intellectual property as well. We have multiple patents on -- that cover the formulation of our 34-milligram capsule, and then we have a massive use path on our 10 milligram tablet. Those are only 2 approved drugs or forms of the drug. Our composition of matter patents take us into the second half of 2030 that includes Hatch-Waxman extension. And then our formulation patents around the 34-milligram capsule formulation run to 2038 and then the method-of-use patent on our 10-milligram tablet take us into 2037. So we feel very confident about the integrity of our patents, and we'll seek to vigorously defend them. We're currently undergoing typical and a litigation that we go through in our industry. And again, we're very confident in the strength of our patents.

Yes. Can you provide any more color on the ANDA litigation, especially but -- presumably, there's a few companies that are looking to make a generic just because your launch has been strong. And what has been your strategy to address those?

Yes, because we're in litigation, I don't want to go into too much detail, but as I mentioned, it's what I would describe as kind of prototypical and litigation. And we have 5 companies that filed on first day they could. We've commenced litigation against all of them. We've settled with one. That company we settled with was a very, very, very modest concession at the very end of the longest of our patents with what you typically have the most favored nation clause there. So we're continuing to go through the typical litigation, we have a trial date set for the middle of next year. That will address the patents that are -- that I mentioned that are currently at the heart of our patent estate, but we'll -- we have other patents that I mentioned that are very important as well. And that may take some additional period of time to get to the bottom of that.

Okay. Throughout the launch, you've been engaging in various types of DTC to increase awareness among patients. How has that correlated with uptake historically?

Yes. Every DTC -- let me just back up for a second. So DTC -- our DTC effort are multi-pronged. They include television advertising that some of you may have seen from time to time and a lot of digital work that we do online. And all of it is focused on the gap that I mentioned earlier. Parkinson's patients, when they're first diagnosed with Parkinson's typically don't have psychosis that typically occurs later in the disease. And for -- and it will occur only in about 40% to 50% of Parkinson's patients. So for that reason, typically, physician -- or many times, physicians don't mention to their patient that you may develop hallucinations or delusions at some point in the disease life cycle. And so when it happens, they typically don't make that connection. And so closing that gap so that they understand that this is a part of their Parkinson's disease, not just some other issue that they have has been very important so that they can have the right discussion with their physician. So our DTC efforts are dedicated in helping educate patient populations and caregivers to close that information gap. And every television component of our DTC campaigns that we've run has had a positive ROI, and it's been very helpful in us closing the gap. We don't run television ads 24/7, probably maybe one brand in the pharmaceutical industry that kind of seems to do that, but the idea is to run them as appropriate. You pulse them from time to time and what we see is the benefits go well beyond the time that you might see the more television.

So what penetration do you think you have in the PDP market today?

So in the office space setting, we're now up in the low -- just about 20%. In the long-term care settings a little bit lower. And as I've said before, we've got a lot of room to continue to grow the drug. If you go back to the -- before we launched the drug, we said, don't expect kind of -- I realize people listening this won't be able to see my hand movement, but don't expect a C-shaped curve that kind of goes up fast and then levels out pretty quickly. Instead, you should expect to see a very linear shape curve with attractive revenue growth year-over-year, quarter-over-quarter. And that's exactly what we've seen with the drug. Of course, during the course of pandemic, the rate of growth has slowed somewhat as a result of the market conditions I described. But we've been able to continue to grow the drug and have a lot of room to be able to continue to broaden and as I mentioned, as we all adjust to a new normal in particular Parkinson's patients and their treating physicians adjust to a new normal, we expect our rate of growth to accelerate significantly.

So if you had an internal expectation of where sales would be in 2022, how has COVID impacted that, if any, in any way?

So, of course, we give guidance. We have a range of scenarios that we model. And I would say that based upon what we've seen today in early May with the pandemic, it's tracked pretty much what we would have -- what we -- I would say, probably at the center of our models in terms of what we expected. Again, I can't predict what will happen with COVID throughout the remainder of the year. But I think we're in a position now where at least in the early days of the pandemic, we all were struggling with, well, what are the air bars? How wide can you back there? I think we have a really good idea for that now and eager to try to build on the momentum that we're seeing.

Okay. So let's move on to the second indication that you're trying to get approval for now, ADP. For anybody who's not familiar, maybe you can just give us a very quick reminder of how we got. So at this point, where you're applying for ADP because originally, of course, you're applying for a much larger umbrella indications ERP, we had all expected that, that would be approved by now because of comments that FDA had made about needing just one study and like what needed to be shown in that study, but they had a change of heart, it seems. So how did we -- how are you feeling about ADP and what is the market opportunity that you see for it now?

Yes. So I'll try to make this quick. So we were approved in Parkinson's disease psychosis. At the time we approved the company had already started. It was a previous management team to start this study but had already started the study in Alzheimer's disease psychosis. When we, the current management team took over, we finished that study and had positive results from the study. We went to the FDA had a typical end of Phase II meeting and said, we'd like to study this in the next study in a broader fashion. So instead of studying just Alzheimer's patients, we like to study dementia patients because although Alzheimer's patients represent about 2/3 of dementia patients altogether, there's some other types of dementia that we felt were important. And primarily, the real crux of this point was the -- while the underlying etiology for those various types of dementia may differ, the psychosis doesn't, it's very similar. It presents in a very similar way, responds in a very similar way, et cetera. So we've got aligned with the FDA around doing that. And just in fairness, I want to say, the FDA always operates and they're always very clear on this, that when you make -- when they get aligned with a plan, it's subject to review. It's subject -- they can't predict in advance how they're going to react to data. So we're in the Phase III program. While these successful results, in fact, so successful, we stopped the study at an interim read because we were so statistically significantly positive. We filed on that data. And as I think probably everyone knows now, we've got a complete response letter. So the FDA did not accept that application. We had 3 meetings with the FDA after receiving a CRL. We have very good engagement, very productive discussions, both the psychiatry division and the office of neuroscience were present. And again, in fairness to them, I would say, their view was that now after seeing your data, we think the best way to study this population or assess this popular or consider approval is not looking at dementia broadly, but looking at various subtypes. It's a little bit of a challenge for us at that juncture because we didn't design the study nor sized it in order to produce statistical significance at individual subgroup basis. We did it for the broad population. And so we -- we -- through the course of these 3 discussions, we pressed back on this. The FDA was very clear that they think that their current thing is the best way to study this after having the benefit of seeing our data is on a submitted basis. And so we've aligned with that. So we have resubmitted now with seeking approval for Alzheimer's disease psychosis, which is, again, about 2/3 of the dementia-related psychosis population. We are highly confident in our data. As I've said all along, we view this resubmission as an opportunity to come in and make our case that we should be the first drug approved to treat Alzheimer's disease psychosis. And one of the reasons we think that a very important consideration in assessing this is just the recognition that there's nothing approved to treat these patients today. Drugs that are used off label has been demonstrated in very large studies that they impair cognition. And it's not insignificant. It's equivalent about 1 year of disease progression. So they actually make the primary symptom of dementia worse. They impair motor function, and we've shown statistically significantly that we don't do either of those. So we have a very successful Phase III study at -- in the population that we set out the study. We're now seeking an approval or a subset of that population, where admittedly, our results are not statistically significant, but they are clinically meaningful. And usually, when you have clinically meaningful results, you say, okay, well, are they statistically significant so that I can feel confident that this is not just by chance. It's a real finding that's a drug effect. Because we didn't size the study for that, our results are, although they're clinically meaningful are not statistically significant, and so in order to answer that question, well, is it a real effect? Or is it a drug effect or is it a chance? We've done a lot of work, multiple cross-sectional analysis to see, well, how consistent is this effect? And what we see is it is very consistent. It's consistent on the primary endpoint of relapse prevention. It's consistent on the SAPS H + D scale. It's consistent throughout the open-label period, throughout the relapse period. It's consistent when we do cluster analysis and break down individual elements of the SAPS H + D scale to see if we see consistency across the subgroups, in particular within the Alzheimer's subgroup. So it's highly consistent. We believe that supports the view that it is a drug effect and should support approval of the drug. And we have one other study that I mentioned a second ago, we referred to the 019 study that we ran that original Alzheimer's disease psychosis study that's positive. The FDA has expressed some concerns about that. relating to some of the way that the study was conducted prior to the current management team getting involved. And I'll just simply say as it relates to those issues we've done a lot of work to -- in response to that, we believe that those issues also support the conclusions of the study. And just quite simply, one of the analysis we've done is there were some protocol deviations in the study. And so many times, what you do is you just exclude all those patients and see if it changes in conclusions. In our case, it does not, in fact, the p-values of the statistical significance gets slightly better when we do that. So that's our case. That's our -- the key tenets of our efficacy argument that will also be supported because this is an sNDA where we have an approval in Parkinson's disease psychosis also be supported and you'll hear us talk about our results in our Parkinson's disease market as well because on the sNDA, we already approved, if it's a closely related indication as it is for us, the update can also take into consideration of that data as well.

Okay. So everything you said is very logical and well thought out and well explained. But if one were to just look at this on just the facts. The facts are that it seems that FDA asked you to do a study whereby you'd be able to show statistical significance. Now you've done work post hoc to justify why you think that's not necessary. So when you weigh the pros and cons of taking this approach versus saying, okay, they want us to be clear, they want us to do another study. And that seems to be the cleanest way to approach it. Why not take that versus the approach that you've taken here? Is it a time issue?

Yes. I just want to clarify one thing. So when you say that the FDA has asked us to run the study. The study that we ran is the study that we aligned with at the end of Phase II meeting, the broad ERP study. What we're doing now by looking at subgroups is a post-hoc analysis. And a lot of the analysis that we are presenting in response to that is also admittedly a post-hoc analysis. So we're in this situation that's -- we all seen circumstances where companies run a study in a population, and it doesn't work, but they look at subgroups and individual subgroup. It looks like it works, and they may file on that. Sometimes it works, sometimes it doesn't. There are other instances where companies run 2 or 3 subgroups and then try to extrapolate and file to a broader population, sometimes that works with FDAs and sometimes it doesn't. Ours is very different. We actually ran a study in the Grade 1 population that was wildly successful. But now we're focusing on a subgroup. And so that's why we have a little bit maybe atypical situation or a data set that we were doing here. But again, as I mentioned, we're highly confident in our data, and we believe it strongly supports approval. Your question about why not just run another study is a fair one. The FDA has mentioned in the 3 meetings that I mentioned, they did say, we think your best avenue is to run another study. That's not surprising. When you get a CRL that's typically, you would expect that many times to be the position of the FDA. We are not planning to do that for a few important reasons. One is, quite honestly, it would be very difficult for us to assess how long it would take to do this study or if it's even doable in the pandemic environment we're operating. And these are frail elderly patients. And so it would be challenging at best, I think, to run a study like that in this population. In addition, we think that the data we have, as I mentioned, we strongly believe in it, and we think it supports approval, particularly given the very significant unmet need. And so our view is that it would be a mistake to make patients wait for running another study, which might not even be possible to do. So we -- that's the reason that we've resubmitted on ADP. We got agreement with FDA at the last meeting we had with them. They said very explicitly to us a couple of times. We get your position. We understand you're choosing not to run another study. We get it. If you submit it, we'll review it. I think the fact that they are having an advisory committee is a strong indication that they're giving it a very fair and thorough assessment. Advisory committees are not an insignificant amount of work for them, and we're eager to go in to make our case.

Okay. So we look forward to that happening June 17.

June 17.

Okay. With that, we are out of time for today. But thank you very much for your participation today. Thanks, everybody, for joining us, and we look forward to your next update coming up in, I guess, a month's time or so.

That's good. Thanks, Tazeen.

Thanks, Tazeen. Thanks a lot.

Thanks, Steve. Thanks, Mark.